French Tax on Million-Euro Salaries Won't Exempt Soccer Teams

<b class="credit">Fred Dufour/AFP/Getty Images </b>French President Francois Hollande is seeking to impose a 75 percent tax on businesses that pay salaries of more than €1 million.
Fred Dufour/AFP/Getty Images French President Francois Hollande is seeking to impose a 75 percent tax on businesses that pay salaries of more than €1 million.

PARIS -- France's revamped 75 percent super-tax on annual salaries above €1 million will apply to all companies, officials in the prime minister's office said on Tuesday, rejecting suggestions that soccer clubs would be exempt.

President Francois Hollande is redrafting his super-tax plan to apply to firms paying the highest salaries after the Constitutional Court rejected an initial plan to impose the levy on individuals themselves.

The policy, seen as a symbolic attempt to force the rich to contribute to painful measures to pull France out of economic crisis, suffered another potential setback on Monday when a top French soccer official said clubs wouldn't have to pay it.

Noel le Graet, president of the French Football Federation, said soccer clubs employing players on million-euro salaries would be exempt from the tax because it would only apply to businesses with more than 5,000 workers.

But an official at Prime Minister Jean-Marc Ayrault's office told reporters that was incorrect. "The new measure will affect all companies paying out salaries above €1 million," he said, adding that no company would be exempt, regardless of size.

Details of exactly how the tax will work remain vague, but officials said companies would pay a total adding up to 75 percent in tax -- which includes all social fees -- on the portion of individuals' wages exceeding €1 million.

A second official at Ayrault's office confirmed the tax would apply to soccer clubs as well as employers of performers such as actors and singers on company payrolls. It would apply to small and medium-sized firms as well as larger ones.

Les Echos business daily, citing finance ministry sources, reported that the new tax could raise €500 million ($640 million) a year, double what the original version was set to raise, although it should apply to just under 1,000 people as against 1,500 for the initial plan.

Outcry Over Extra Burden

Hollande has caused outcry with the super-tax, promised in his campaign for the May 2012 election, with leading figures from sport, entertainment and finance arguing it would hurt their ability to recruit top talent from around the world.

Hollande says the tax, which is to stay in place for two years as a temporary measure to help the country out of economic gloom, is fair as the wealthy should bear a bigger burden in the effort to bolster public finances.

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Top soccer clubs like Qatari-owned Paris Saint-Germain, or PSG, may be able to keep paying big salaries for stars like Zlatan Ibrahimovic, but smaller clubs paying one or two stars more than €1 million are seen as struggling with a bigger tax bill.

"I don't think it's good for French football, it's not good for French clubs and it's not good for the place of [France's] Ligue 1 in the world," PSG chairman Nasser al-Khelaifi said on France Info radio.

Olympique Marseille head Vincent Labrune added: "Even if a soccer club like Olympique Marseille has a bigger media profile than a CAC-40 [blue-chip] company, we are still a medium-sized provincial business. We do not have the means to pay this tax."

The Socialist government is battling to raise extra revenue and trim ministerial costs as it tries to bring the public deficit below a European Union ceiling of three percent, having admitted it will overshoot that target this year.

Another proposal being examined is the possibility of trimming family allowances for well-off families, the officials said. Such a move could save several hundred million euros a year if carried out, according to French media.

Reporting by Elizabeth Pineau; writing by Nicholas Vinocur; editing by Catherine Bremer and Mike Collett-White.

Originally published